The Truth about Hard Money

By Mike Vogel, Co-Owner of Mikes Hard Money

www.MikesHardMoney.net

This is the last part of a series of 3 articles about myth and truths of the hard money lending business.  In this last article we will talk about some of the truths about hard money loans.  People wonder about the lenders, whether they are professionals or not, also about reasons to go for a hard money loan, and last but not least about the security of the loan.

Is it true that hard money lenders are professional and not “Scam Artists”?

The truth is that most hard money lenders like many other bankers are hard working professionals with reputations at stake.  The problem always is that there are few bad experiences and few bad apples in this business like in most businesses.  Like banks, hard money had its good and bad lenders.  As the industry evolved over time, there are many more good than bad today.  

The key is, like in any other business, is knowledge.  You need to know the difference between a good and a bad hard money lender.  You will find this out when you do your due diligence.  First learn about the product and services that they provide.  Second, learn about the lending process.  Third ask for references, professional as well as previous clients.  And last but not the least is to not be afraid to ask questions.  Most of the hard money lenders today are well-trained professionals acting in the best interest of their borrowers.  The hard money lending industry has changed significantly over the last decade.

Is it true that hard money loans are only for desperate borrowers?

First you need to understand the basic difference between hard money, banks, and other financial institutions.  They all provide special products and services for the needs of different clients.  A bank for example will allow for the ease of financial transaction including providing loan to their clients, but those loans fall into the cash flow based type of products.  Hard Money lending is based on the asset and not the cash flow.  
Because a number of transactions will not fit the conventional lending practices, hard money loans are just another means of financing these transactions.  Some of those products that hard money offers are; Commercial bridge loans, land loans, and residential rehab loans.

Is it true that hard money lenders are out to steal my property?

That is not the business of a reputable hard money lender.  As a matter of fact they will be really hard when looking at the particular property before making any kind of decision.  Do you know why?  Because they don’t want the property back, and will do whatever it takes to help the borrower pursue a viable exit strategy.  They earn their living by lending and servicing your loan on behalf of their investor.  If they take your property, the stream of income stops and the client is loss.  And believe me when I tell you that is not what the hard money lender wants.  On the contrary what we want is for you to finish your project and to profit, so you can keep coming back for more transactions.   

We understand that finding the right hard money lender may be a challenge, so make sure you are dealing with someone who has the knowledge, reputation, and ability to close your loan.   Mike’s Hard Money will provide you with the real estate investment cash you need for your deals getting you closer to your desired lifestyle. When it comes to Hard Money Loans no one but Mike can provide you with CASH in a FLASH!  Visit www.mikeshardmoney.net to find out more information.

Right and Wrongs About Hard Money

By Mike Vogel, Co-Owner of Mike’s Hard Money

www.MikesHardMoney.net

This is part 2 of a series of articles that will “debunk” the myths about the hard money industry and we will explore why hard money is a good alternative for investing in real estate.  In this article we will talk about some right and wrongs about the industry.  

“Are Hard Money Loans Considered High Risk Loans?

RIGHT!

This is the reason why the points and interest rates are higher than bank loans. The property that is used for this loan is the collateral for the loan, and most of the time, we do require the borrowers to personally sign for the loan and pay for it if something goes wrong.  The bottom line is, if your loan was not a High Risk Loan then you would seek other financing options.  This type of financing does not come cheap.

 

“Client Credit Score” is the basis for the hard money to make his decision?

WRONG!

Your credit score is not the basis for lending.  The only reason credit reports are pulled is to make sure that the information that you gave us about your financial and personal situation (payment history, lines of credit, etc.) on the application match with a third party repository.  Remember that the “Hard Money Loans” are asset based.  Meaning that the loans are given based on the merits of the asset itself (is based on the property’s worth). Aside from that, we also check the borrower’s credentials such as their liquidity, the investor’s experience, real estate team that they have, as well as their income and expense ratio.

 

“Closing will take 30 days or more?

WRONG!

These loans are pretty quick to close!  If a complete file is submitted to and your hard money lender can verify all the facts about your loan as well as the property values, chances are that you could get it to close in 48 to 72 hours after final approval.  We normally see 5 working days after all the paperwork is in.

When you request a hard money loan, the Hard Money Lender only uses the appraised value of the property and not the purchase price?

WRONG!

That may be true in the past but today hard money lender use three valuation methods to make sure that the risks of the loan are kept to a minimum.  Remember that hard money loans are not based on cash flow or the ability of the client to repay, they are mainly based on the value of the asset (asset based lending).  The three methods of valuation are; 1) The purchased price, 2) the Appraised value of the property as is, and 3) Appraised value of the property after repairs are done or “after repaired value.”  We actually need not just what you are buying it for and but also how much is going to cost to do the repairs.

One last word about Hard Money Lending, if you seek this type of financing please make sure you are dealing with someone who has the knowledge and ability to close your loan.   Mike’s Hard Money will provide you with the real estate investment cash you need for your deals getting you closer to your desired lifestyle. When it comes to Hard Money Loans no one but Mike can provide you with CASH in a FLASH!  Visit www.mikeshardmoney.net to find out more information.

Hard Money Myths Exposed

By Mike Vogel, CEO of Mikes Hard Money
www.MikesHardMoney.net

In these three articles series we will “debunk” the myths about the hard money industry and we will explore why hard money is a good alternative for investing in real estate. In this article we will start with the most common myths about the hard money industry.

Myth: Hard money loans are so-called because the lenders and their terms are hard to be negotiated with.

The fact is that the nature of this type of investment does indeed require hard qualifications or conditions. The “hard” in hard money actually refers to the difficulty of the project itself. The project is made out of rather hard to finance circumstances. For example, the property is difficult or the conditions of the transaction may be difficult because, the property more likely is in disrepair, so it makes it hard for conventional or traditional financing to take place. Another circumstance is the amount of foreclosure in the area, because of that we can not obtain a positive market valuation. The borrower may even be a difficulty. Every proposal is unique and must be evaluated to discover its own merits. Nevertheless, virtually every project proposal that’s received harbors at least one or more of the following circumstances: money is needed quickly, often within a week; the borrower has little or no cash equity, and cannot raise a sufficient amount or is not willing to sacrifice an equity interest in the project to an equity investor; the borrower has a history of bad or limited credit; the borrower has tried for several months without success to obtain financing; the project itself is problematic or has significant questions, and too many other reason.

Myth: Hard money loans are excessively expensive.

If the loan was easy to obtain or the circumstances where traditional in nature then the borrower will have no problems and be able to find less expensive pricing for the project loan, and chances are that the borrower would likely not have sought hard money to begin with. The pricing quoted by the lender is usually commensurate with the circumstances and the risk involved. Hard money loans are usually a blend of debt and equity risk; priced higher than conventional debt but less than the cost of equity investment.

Hard money loans are actually priced just like any other loan. If a Fortune 500 lender were offering a quote on the same loan, their pricing would be very similar. The difference is that it would not be referred to as “hard money” simply because of the status of the lender. Therefore, a borrower seeking quotes for comparison on a hard money loan will generally find the competitive proposals to be priced very similarly. The final choice, then, should be based on the lender’s reputation and ability to close, the conditions associated with each proposal, and the chemistry between the two parties.

Myth: Hard money lenders are disreputable loan sharks.

The truth is that most of the hard money lending firms are lead by successful investment bankers, real estate brokers, developers, lawyers, accountants and other professionals in the field. These are firms that specialize in financing products that are hard to obtain. Most of these industry leaders are expert in financial products with years of experience and can differentiate between a good deal and a bad one. Savvy borrowers appreciate the fact that a good hard money lender lead them in to more successful approach to investing and will help the borrowers better focus their project searches.

To be successful (profitable) hard money lenders must be capable of both assessing risk and closing loans. They are professional business people who understand the way the system works. They can be tough, but they can be fair as well. A prudent borrower, however, should perform his own research of the investor at an early stage in the relationship in order to minimize or avoid any potential problems.

We understand that finding the right hard money lender may be a challenge, so make sure you are dealing with someone who is licensed and really has the knowledge and ability to close your loan. Mikes Hard Money will provide you with the real estate investment cash you need for your deals getting you closer to your desired lifestyle. When it comes to Hard Money Loans no one but Mike can provide you with CASH in a FLASH! Visit www.mikeshardmoney.net to find out more information.